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When Globalization Fails by James Macdonald: Review

Pax Americana could learn a lesson from history and the fall of Pax Britannica

When Globalization Fails The Rise and Fall of Pax Americana, James Macdonald, Farrar, Straus and Giroux 292 pages $31.50

James Macdonald, author of When Globalization Fails The Rise and Fall of Pax Americana.

By Robert CollisonSpecial to the Star

Fri., Jan. 9, 2015

In early October the Financial Times of London reported that, although the U.S. is still technically the world’s largest economy, it has been superseded by China in terms of purchasing power. By that key metric, China is now No. 1. And it will doubtless be economically preeminent by every measure very shortly; there’s no question who’s got the wind at their back — it’s China. This is why James Macdonald’s new book, When Globalization Fails, The Rise and Fall of Pax Americana, is so timely.

Fundamentally Macdonald argues that the world is at a geo-political/geo-economic tipping point where the unipolar post-Cold War world, with the United State’s unchallenged preeminence in global affairs, will soon be superseded by a new international order where America and China will square off against one another. Whether this new state of affairs bodes well or ill for the rest of us is the big question. To answer, Macdonald looks to the history of the 20th century for guidance. “If the world’s great and rising powers are going to avoid conflict, it will require a determined effort to avoid the pitfalls of history.”

The “back story” of singular interest to Macdonald is the seismic shift in economic and political power in the decades before World War One erupted in 1914. Macdonald argues that the 19th century was the first era of globalization and, in its initial phase, Great Britain reigned supreme. Under the aegis of its free trade ideology and mighty Royal Navy, “the world economy experienced an unparalleled economic expansion and military conflict was minimal.”

At the height of Pax Britannica in 1860, Britain had 35 per cent of total world manufacturing capacity but the country’s pre-eminence was on a slippery slope. By 1900, Imperial Germany was nipping at England’s heals, economically and militarily. Would Germany’s rise result in conflict? The intellectual orthodoxy of the era argued “no.” Manchester free-trade liberals believed conflict unlikely in a world where economies were interdependent. Imagine their surprise when the most brutal conflict in history, to date, put paid to that argument. So if free trade wouldn’t guarantee peace, what would?

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Post-1918, free trade was out; protectionism was in and, with it, an economic model called autarky, i.e. economic self-sufficiency. For the Nazis autarky translated as “lebensraum” — breathing room. Unfortunately, for Germany’s neighbours that meant first annexation, then annihilation.

For Macdonald, the carnage of the first half of the 20th century is a result of the collapse of the 19th century’s Pax Britannica with the emergence of aggressive new powers — Germany, Japan, etc. — looking for their share of the economic spoils. What made the post-1945 international order relatively tranquil was the emergence of a new global hegemony, the United States, and its Pax Americana. After World War II, the U.S. had the economic clout to set the agenda. Post-1945, it accounted for about half of total world production.

This new Pax Americana for the most part worked well because Uncle Sam was a relatively benign overseer. As Macdonald notes, “America’s allies, old and new, accepted the necessary fact of American supremacy on the understanding that the new hegemony would not abuse its military and economic power to exclude them from the global marketplace.” Far from it. The new global economy returned to the free-trade regimen of the 19th century. No more autarky. “Under the American umbrella, the non-communist world flourished.”

Which bring us to the present day. China is challenging the U.S. as Germany challenged Britain. Is a new global conflict inevitable? Will history repeat itself? The architect of China’s economic resurgence — Deng Xiaoping — often talked of his country’s “peaceful rise,” but sotto voce, he also employed a classic dictum to describe China’s relationship with the outside world: “Hide your strength, bide your time.”

Still, I remain sanguine. At one point, Macdonald invokes the Dell Theory of Conflict Resolution, which stipulates that when countries are both part of the global supply chain will never fight each other. It seems so reasonable. But as Macdonald notes, “That is what they said in the 19th century.” Clearly, Macdonald believes the jury’s still out about what the geo-political future holds.

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